The Myth of Philanthropy: Why Billionaires Won’t Save Us
Have you ever donated money to a charity or taken your clothes to the Goodwill store? How did it make you feel? Amazing, right? Most of us at some point in our lives have either donated or will donate money, clothes, food, shelter and our time to others. And we do these things not because there’s an immediate reward for it. More often than not, we feel best when we give to people who cannot reciprocate, or at least not in the same capacity.
This altruistic feeling that makes us give to one another even when there’s nothing to receive was described by Ancient Greeks as philanthropia, the love of humanity. Coined around 2,500 years ago, this term was first used in the myth of Prometheus. In the story, the Titan god Prometheus saved humanity from Zeus’s destruction and earned the title of philanthropos tropos, or humanity-loving character.
Although that’s the term we now mostly use to describe this phenomenon, the love for humanity isn’t an exclusively Greek concept. The idea of benevolence towards one another has its roots deeply planted in ancient civilizations throughout the world. From the Middle East to Egypt, to the city of Rome. It was also propagated by Babylonian communities as early as the third millennium and is at the core of all Abrahamic religions and many others across the world.
In Egyptian sacred writings such as the Book of the Dead, it was made clear to the people of the ancient world that successful passage into the afterlife depended on a lifetime record of benevolent acts toward people who were suffering. While many of us today do not follow any of these ancient teachings or believe in an afterlife anymore, the messages they taught have stayed with us through millenia.
So, when capitalism and accumulation of wealth began rising in the West in the 1700s, it wasn’t surprising to start seeing rich philanthropists pop up whose lives became characterized by the voluntary act of giving a large sum of their wealth to promote the common good. This type of lavish giving, the one we most associate with philanthropy today, was first popularized by rich bankers such as George Peabody, who is now widely considered the father of modern philanthropy. Peabody was an American merchant banker who came from poverty. After amassing his fortune in the early 19th century, he never forgot his humble beginnings and dedicated the later years of his life to charitable work. It is believed that he gave away around $8 million of his $16 million fortune to charities. His incredible benevolence paved the way for later generations of rich philanthropists.
Sadly, what we have today isn’t what Peabody envisioned when he gave away half his fortune. What started with the notion of lending a helping hand, charitable work is no longer at the core of philanthropy in today’s world. Tax evasion and personal political gains have tainted the hands of the world’s wealthiest givers and have caused a huge wealth gap that only seems to be growing, creating an ever-expanding rift between social classes. But what exactly happened? How did we turn that amazing feeling you get giving money away to charity into a corrupt scheme for billionaires and large corporations? To understand this, we have to go back to the end of the 19th century.
Andrew Carnegie, an American industrialist, blazed the trail for philanthropic work to be used as a tax evasion strategy. Carnegie opposed federal income taxes and argued that he was better off allocating those funds to charities rather than the government. At that time, philanthropy by the ultra-rich funded social services the government could not afford. As a result, senators worried that taxing the wealthy on these charitable amounts would reduce their contributions and increase the burden on the government, a logic that still prevails to this day.
The government’s solution to this problem was a tax exemption on income for money donated to charity. This legislative move allowed for new wealth management strategies, pioneered by Carnegie who founded a charitable trust that took advantage of the tax exemptions. Before long, wealthy industrialists and bankers started following in Carnegie’s footsteps, protecting their fortunes from substantial taxes under the cover of charitable trusts. In 2014, Nicholas Woodman, the founder, and CEO of GoPro, took his company public and was suddenly worth $3 billion. To celebrate his newly acquired fortune, Woodman announced that he would be donating a whopping $500 million worth of GoPro stock to a foundation bearing his name.
The truth is not as generous as Woodman would want you to believe. You see, the GoPro CEO took advantage of a loophole that would allow him to donate his money without actually donating it. This is done through something called a donor-advised fund (DAFs). Donor-advised funds are essentially charitable investment accounts in which owners can claim tax deductions upfront without legally being required to distribute the money to the charities right away. As long as the money is transferred into these funds under the ruse of charitable work, owners can avoid paying higher taxes without donating any of it to charities or foundations. The point of these funds was originally to encourage more resources to get to communities where they are most needed. Sadly, the way the laws are structured allows tax deductions without any requirement for that money to ever reach those intended communities.
It’s no surprise then that since 2007, the number of DAFs in the U.S. has tripled. And while the amount of money donated every year keeps increasing, the actual amount going to the communities barely is. Think about this for a moment. From the $466 billion donated in the U.S. in 2020, only around $34.67 billion made its way to qualified charities. A huge sum of money, yes. But not nearly as much as the rich would have you believe they give away.
The reality is that these billionaires are entitled to spend their money however they wish. We can argue the ethics of becoming a billionaire another day, but let’s say they got there on their own merit, they aren’t required to give anything. So the main problem for me is not that they don’t give, but that they claim to give more than they actually do. It’s the need to be seen as a hero without doing anything heroic. Take Elon Musk, for example. Last year, he announced that he would be donating $5.7 billion worth of Tesla shares to an undisclosed charity. However, to this day, no single charity has reported receiving the funds from Musk’s donation, with many experts hypothesizing that he simply dumped the cash in a DAF.
Financially speaking, offloading $5.7 billion worth of Tesla stock allowed Musk to claim a tax deduction of 30% on his adjusted gross income. That’s a whopping $570 million saved on taxes. So, it seems that the only beneficiary from Musk’s charity is Musk himself. First on the tax deductions, and second on the public praise received because he theoretically donated so much money. Just months before that, Elon tweeted that he would donate $6 billion to end world hunger if the UN could show him a plan on how they would spend the money. The UN responded by saying that $6 billion will not solve world hunger but could potentially save 42 million people on the brink of starvation. From pooled income funds to private foundations to DAFs, philanthropy today is only magnifying the issue of income inequality and adding to the already substantial gap in wealth. But that’s not even all.
You see, the word “philanthropy” does not only mean giving to charities anymore. Now, it is also used to describe giving to groups that promote social or civic causes. And these groups can keep their donors completely anonymous which basically gives billionaires the power to weaponize their philanthropy for political gains. In her book “Dark Money”, investigative reporter Jane Mayer documents how the uber-rich have used their charitable foundations to “invest in ideology like venture capitalists, leveraging their fortunes for maximum strategic impact.” Mayer argues that these foundations only support causes that benefit their financiers by campaigning against regulations and sowing misinformation in the hearts of the masses.
The Olin Foundation, for example, led numerous anti-environmentalism campaigns. The Bradley Foundation, funded by $1.6 billion, waged aggressive campaigns against teachers’ unions and traditional public schools. Since the donations to these foundations are tax-deductible, donors are not accountable for the public use of their money, which only adds to their power and influence. And because these donations can be completely anonymous, it also rids the billionaires of any iota of responsibility for their actions.
The sad reality of our society is that this is not something new. Rich people have always depended on favorable political conditions to build and preserve their wealth. Mega philanthropists know that their money can influence governments far more than they’d ever be able to, even if they were to run for office themselves. This is why when Bill Gates was was asked whether he’d run for president, he said,
“I could have as much impact in my role [as a philanthropist] as I could in any political role. I don’t have to raise political campaigns, I don’t have to try and get elected, I’m not term-limited to 8 years…”
To be fair, Bill Gates and his foundation have dedicated immense amounts of money to battle health crises such as malaria and the reduction of child mortality. While most of his work remains true to the original definition of the word — the love of humanity — there are still some shady things he has done in the past. A few years ago, Gates was able to heavily influence the passing of a bill for charter schools despite voters voting against it three different times. After millions of dollars spent on campaigns that influenced the community into changing their decision, the bill passed the fourth time. Almost immediately, Gates began subsidizing charter schools until the Supreme Court declared it unconstitutional. But would that Bill stop Gates? Well, no. He simply used his influence with lawmakers to fund a new bill to allow him to circumvent the Supreme Court’s decision so he could keep funding these charter schools.
This is a great example of how wealth can influence public policy. Plutocracy, or placing the power in society in the hands of the wealthy, can undermine our laws and leave us vulnerable to the whims of the rich. Whether they have good intentions or not, the lives of the populace should not be in the hands of a few, no matter how wealthy they are. We should all have a say in matters concerning our lives, regardless of our socio-economic status. The Giving Pledge, which was launched by Gates and Warren Buffet in 2010, has more than 200 ultra-rich signatories who have pledged to donate at least half their wealth toward the betterment of humankind.
This is an excellent achievement and one that must be praised, giving such large amounts of money can never be easy and so the effort must be acknowledged. However, at the same time, we must also look at the other side of the coin and the power that these billionaires ever so greedily hoard in the process. In his book “Winner Take All”, Anand Giridharadas argues that rich people who have lobbied for an economy of injustice have at the same time marketed themselves as our saviors and the solution to all of our problems. However, in doing so, they subtly hide the fact that they cause most of these problems themselves. CEO of Wayne Enterprises by day, hero of Gotham by night.
The sinister truth is this: As long as there are so few people with so much money and power, the rest of us will have no say. We need to go back to the original meaning of philanthropy, where the love for humanity was the only driving force. Not money, nor power, nor control. We need to close the loopholes in the system that give people an advantage by donating money without having to donate anything at all. Until then, we’ll have to settle for the supposed heroes with political agendas to come and save us from the very problems they brought upon us.